Multinationals’ Mirrored Merger Mania

So-called “Southern” multinational firms in developing and transitional economies have overtaken industrial world competitors in the global M&A sweepstakes and now account for 55 percent of the total, according to new research by Geneva-based UNCTAD. Last year deals were up 5 percent overall to $350 billion, as developed country investors retreated from natural resources and manufacturing and focused on services and telecoms. Emerging market rivals in comparison went heavily into the consumer and financial sectors, with two-thirds of takeovers in other EMs where “Northern” affiliates were often divested. Companies from China, Thailand, India and Mexico were the most active and banking was also an attractive cross-border target in Latin America and the Middle East. Developing economies were the source of 40 percent of total FDI outflows at $450 billion versus $850 billion for advanced ones, as levels there “continued to stagnate” and have fallen 50 percent since the 2008 crisis. The EU’s amount rose 5 percent, but individual contributions from transnational firms in France, Germany and the UK all fell. Japan’s activity jumped 10 percent to a record $125 billion as auto and electronics outsourcing accelerated. Emerging Asian outward investment was one-fifth the global sum with big Chinese transactions like the $20 billion CNOOC-Nexen and $5 billion Shuanghai-Smithfield Foods tie-ups in Canada and the US respectively. Indian activity slumped to decade-ago levels, while Africa’s climbed 60 percent on South African and Nigerian company appetite. Central and South American allocation was off one-third while Caribbean offshore domiciles slightly increased commitments. Transition countries almost doubled their outbound footprint to $100 billion with projects from Russia and Kazakhstan led by the TNK-BP/Rosneft venture now the indirect target of Western sanctions for Moscow’s Ukraine maneuverings. The Asian Development Bank’s May annual meeting opens in the Kazakh political capital Astana after it approved $20 billion in financing to the public and private sectors with an emphasis on education, healthcare and infrastructure. Over 1.5 billion people in the region remain in poverty and the institution recently prepared a revised multi-pronged strategy to tackle the problem and related woes like environmental degradation.

Host President Nazarbaev after 22 years in power is watching the Russia-Ukraine confrontation warily as he also encounters pipeline delays in the giant Kashagan field that may endanger the 5 percent GDP growth prediction. Under his vision to achieve world-ranking status by 2050, the “stan” in the country’s name considered negative would be dropped, and per-capita income would top $50,000 after WTO admission. Partial privatization IPOs will continue through the stock exchange, with the MSCI index down marginally through April, and the central bank after a big devaluation has pledged exchange rate stability as it tries to complete banking system cleanup. State-run BTA and Kazkommertsbank are to merge as they grapple with a 30 percent NPL legacy which briefly provoked a run at smaller banks in the wake of the currency adjustment as deposits headed for safer outlets.